Which one is better 1099 or W2

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Hi,
I recently opened a LLC firm. My spouse is a primary owner and I am manager of the company. I will be working at a client location. The client did corp-to-corp with my company. So client will pay to my company and I will be drawing salary from my company.

I have checked differences between 1099 and w2. I am not sure which route I should go with either 1099 or w2 which give me more benefit on my tax.

Some brief concerns:
If I work on W2, I can not reimburse any of my individual expenses like, Bus/Train tickets, Health Insurance etc. Because I am going to work at client place not at my company place.

If I work on 1099 then I can saw all this expenses like as mentioned above except Health Insurance. Health insurance will be big amount around 10k per year.

Could you please suggest me a right option if any one have an idea on this?

Thanks in advance.
Deecee
 

kirby

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Need info:
You said spouse is primary owner. Are you also an owner?
 

Samir

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A couple of different options.

You could write yourself a check, either via 1099 or w2, or just take profit distributions each month. Let's examine each.

1099:
You will have to pay self-employment taxes on your 1040, in which case you have to pay for taxes twice since the company contribution is also made by you. Advantages as you've pointed out.

w2:
Company covers any share of taxes that a company normally would. Disadvantages as you've pointed out.

Profit distribution:
You will be able to expense whatever your business normally can, and the net profit from these can be distributed to the owners of the company. Depending on the LLC tax reporting (s corp, c corp, partnership, disregarded entity), you will have taxes on your personal return, but they could possibly be less than by the other methods. Plus, you don't have the added task of quarterly payroll taxes like with a w2.
 
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Sorry for late reply.

To kirby:
My name mentioned as "Members/Managers" along with my wife name in company registration certification.

In nutshell,
Can I work on 1099 for my own company? Will there are more chances of Audit from IRS if I work on 1099 instead of on W2 for my company?

Thanks
 

Samir

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Sorry for late reply.

To kirby:
My name mentioned as "Members/Managers" along with my wife name in company registration certification.

In nutshell,
Can I work on 1099 for my own company? Will there are more chances of Audit from IRS if I work on 1099 instead of on W2 for my company?

Thanks
I don't see any real advantages doing this than just taking profit distributions. Depending on how your entity is filing taxes (1065, Schedule C, etc), it will either be more or less funny looking.
 

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